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If I invented an expensive machine that destroyed your house then GDP would increase because manufacturing the machine (and rebuilding the house) count as econo

If I invented an expensive machine that destroyed your house then GDP would increase because manufacturing the machine (and rebuilding the house) count as economic activity. This is a big problem with military spending as reflected in GDP. GDP isn't a measure of wealth or quality of life it's a measure of economic activity that is mostly relevant in regards to trade and almost nothing else.

dragonwriter 9y ago
> If I invented an expensive machine that destroyed your house then GDP would increase because manufacturing the machine (and rebuilding the house) count as economic activity. This is again a faulty assumption; while they would count as economic activity, it likely wouldn't be additional economic activity, but displacing economic activity that would otherwise take place, especially the house rebuilding. Also, destroying someone’s house doesn't guarantee it gets rebuilt, anyway.
- InclinedPlane 9y ago
  Sure it would. Why are you building a house destroying machine (let's say tank) in the first place? Let's say it's because your nation is going to war, and has gone into deep deficit spending to finance high levels of production of war materiel. That's a lot of economic activity that wouldn't have happened otherwise. Similarly another nation going to war and paying you to build them tanks might be a similar situation. This isn't hypothetical. In the US GDP and military spending went way, way up during WWII though overall quality of life remained stagnant or went down (due to rationing). Only after the war when production capacity was re-allocated toward consumer goods did quality of life and wealth start to increase. The same is true for houses. Not having a house (or lots of people being recently deprived of houses) is great motivation for building houses. Lots of resources get leveraged that would not normally have been leveraged. The economy isn't a zero sum game, even in regards to production capacity. You notice this all the time when there's a recession or a boom. Total capacity (manufacturing, home building) is elastic, it responds to demand, and that can vary a great deal on a huge number of factors. Destroying a house doesn't guarantee it gets rebuilt, but destroying lots of houses will typically be associated with a lot of home building in response.

dragonwriter 9y ago

> If I invented an expensive machine that destroyed your house then GDP would increase because manufacturing the machine (and rebuilding the house) count as economic activity. This is again a faulty assumption; while they would count as economic activity, it likely wouldn't be additional economic activity, but displacing economic activity that would otherwise take place, especially the house rebuilding. Also, destroying someone’s house doesn't guarantee it gets rebuilt, anyway.

InclinedPlane 9y ago
Sure it would. Why are you building a house destroying machine (let's say tank) in the first place? Let's say it's because your nation is going to war, and has gone into deep deficit spending to finance high levels of production of war materiel. That's a lot of economic activity that wouldn't have happened otherwise. Similarly another nation going to war and paying you to build them tanks might be a similar situation. This isn't hypothetical. In the US GDP and military spending went way, way up during WWII though overall quality of life remained stagnant or went down (due to rationing). Only after the war when production capacity was re-allocated toward consumer goods did quality of life and wealth start to increase. The same is true for houses. Not having a house (or lots of people being recently deprived of houses) is great motivation for building houses. Lots of resources get leveraged that would not normally have been leveraged. The economy isn't a zero sum game, even in regards to production capacity. You notice this all the time when there's a recession or a boom. Total capacity (manufacturing, home building) is elastic, it responds to demand, and that can vary a great deal on a huge number of factors. Destroying a house doesn't guarantee it gets rebuilt, but destroying lots of houses will typically be associated with a lot of home building in response.